ACCOUNTING AND AUDITING POLICY COMMITTEE MEETING

FINAL MINUTES

May 10, 2001

The meeting was convened at 2:00 PM in room 4N30, of the GAO Building, 441 G St., NW, Washington, D.C.

ADMINISTRATIVE MATTERS

• Attendance

Present: Ms. Payne, Mr. Eisenhart, Mss. Jordan and Krell, Messrs. Lane, Maharay (for Mr. Friedman) Pugh, Ritchie, Stout, Taylor and Zavada

Absent: Mr. Friedman.

· Minutes

The minutes of March 8, 2001 were previously approved as final, having been circulated by

E-mail to members.

· AAPC Charter and Operating Procedures

Ms. Payne noted that the AAPC Charter had received final approval from the FASAB as of January 18, 2001. She also noted that we are working with OMB and GAO in order to gain final approval on the AAPC Operating Procedures.

· Project Agenda Status:

Issue #14 Stewardship Guidance Work Group

In 1998, the AAPC commissioned a multi-agency work group to draft guidance that would assist Federal entities in implementing the new standards for reporting and examining information on stewardship land and heritage assets. At the March meeting Ms. Payne had asked the members to review the draft guidance and be prepared to discuss their comments at the May meeting. Ms. Payne noted that the FASAB staff has reviewed the draft guidance to ensure consistency with the standards and has given their comments to the task force for consideration. She briefly mentioned her concerns with 1) the use of the term “stewardship assets” that is not used in any of the standards and 2) the condition reporting section of the draft. One member asked about the use of the terms “basic financial statements” vs. “basic information.”

Ms. Payne gave a brief summary of the public hearing on FASAB’s Preliminary Views on Eliminating the Category “Required Supplementary Stewardship Information.” The Committee agreed to acknowledge the FASAB work in this area in the notice requesting comments on the draft guidance.

The Committee agreed to post the draft document on the AAPC website and ask for comments. Ms. Payne noted that FASAB staff will work with Mark Connelly, of the Government Accountability Office and a member of the Stewardship Guidance Work Group, to get the necessary changes made and get the draft posted to the AAPC website.

Issue #24 Proposed Technical Release5, Implementation Guidance on Statement of Federal Financial Accounting Standard 10 Accounting for Internal Use Software

In June 2000, the Chief Financial Officers Council (CFOC) requested that the AAPC consider issuance of an implementation guide, SFFAS 10 Implementation Topics/Issues, that was developed by a CFO Council task force. The guide provides supplemental guidance to agencies implementing SFFAS 10. Ms. Valentine, FASAB staffer, provided the Committee with the latest draft of the Technical Release (TR). She noted that document was approved by the full AAPC as of April 1, 2001, was then sent to the FASAB on April 3, 2001 for approval and was briefly discussed at the April 27, 2001 FASAB meeting. She also noted that the draft TR notes a few minor changes suggested by several FASAB Members and that the TR is currently in its 45-day Board review period that will end on May 14, 2001. If a majority of the FASAB or any one Board principal does not object to the technical release it will be published by the FASAB.

Issue # 20 Draft Proposed Technical Release 6, Assigning Costs and Liabilities to Agencies that Result from Legal Claims against the Federal Government

In mid-1999 the AAPC had been asked to provide guidance to Federal entities on the accounting and reporting of costs and liabilities as they relate to allocating those cost and liabilities resulting from legal claims against the Federal government. Ms. Valentine provided the Committee with the latest draft of the Technical Release; this version did not include the strikeouts and double-underlines noted in the last version. Ms. Valentine noted that the TR was approved by a majority of the AAPC as of April 11, 2001, by a vote of nine approvals and one dissent. She also noted that the document will be sent to the FASAB on May 18, 2001 for approval and, if requested by any Board member, would be discussed at the June 18 -19, 2001 FASAB meeting.

Issue # 25 Federal Aviation Administration Grant Issue

At the May 2000, AAPC meeting, the Committee agreed to accept a grant accounting issue from the Federal Aviation Administration (FAA). The FAA requested policy guidance on a grant accounting issue that deals with the liability recognition by FAA (the grantor) for expenses incurred by a grantee when the grantee incurs costs after a letter of intent (LOI) has been issued by the FAA but prior to the execution of the grant agreement.

Luise Jordan, Task Force Chair, provided a brief summary of the task force’s conclusions. She noted that as the task force researched this issue it learned that there appeared to be no other Federal entities outside of FAA with transactions similar to those brought to the Committee by FAA. The task force concluded that there was sufficient guidance in SFFAS 5 to address the issue and that the liability did not meet the test for recognition because FAA stated that the costs could not be reasonably measured. Ms. Jordan also noted that the FAA was currently disclosing all of the pertinent information surrounding the LOI transactions in the notes to the financial statements.

Ms. Jordan drafted a response letter to be sent to FAA discussing the conclusions of the AAPC and presented to the Committee. The Committee discussed the issues and the conclusions stated by the task force. Several members believe that a liability does exist at the point a letter of intent is issued and expenses have been incurred by the grantee. However, there was agreement that it appears that the liability is not reasonably measurable until after the grant agreement has been executed and reimbursements have been submitted by the grantee. The Committee also agreed to streamline the current letter. Ms. Payne assured the members that staff would revise the letter and send it to the members before it is finalized and sent to FAA.

Issue #11 Inter-entity Costs

Ms. Payne noted that the Inter-Entity Costs survey had been originally mailed to the members of the Federal CFO and IG communities July 2000 and that comments were due back October 30, 2000. The survey is made up of a series of questions directed to inter-entity costs that are not fully reimbursed by the receiving entity or are not reimbursed at all. The survey will assist the AAPC in identifying specific inter-entity costs that are being incurred by agencies, study their nature, and determine whether they meet the recognition criteria specified in SFFAS 4.

Ms. Payne reminded the Committee that the staff has distributed the survey again to those agencies that did not respond to the first two requests. The request urges the agencies to respond by the extended deadline of June 25, 2001.

Ms. Payne informed the Committee that FASAB staffer, Richard Mayo would present a summary of the survey results at the next AAPC meeting.

· Agenda Committee Report

Mr. Pugh, chair of the AAPC Agenda Committee, reported that there were no new issues to be brought to the AAPC.

· New Business

One member suggested that the AAPC initiate a project on cost accounting in order to develop an implementation guide. The Committee briefly discussed the possibility of initiating a project on cost accounting and some issues surrounding cost accounting compliance.

· Next Meeting

The next meeting will be on Thursday, July 12, 2001.

· Adjournment

The meeting was adjourned at 3:10 PM.